Oduwole: Free Zones Must Earn Incentives Through Exports, Not Domestic Diversion

• Says economic zones have recorded $200 billion, N900 billion in foreign, local investments respectively 

•FG seeks to abolish zone’s tax arbitrage, tightens rules 

•New regulations clarify customs, tax responsibilities amid efforts for greater fiscal accountability

James Emejo in Abuja

Minister of Industry, Trade and Investment, Dr. Jumoke Oduwole, has disclosed the federal government’s move to overhaul the country’s Special Economic Zones (SEZs) to boost exports and fiscal transparency within the space.

Oduwole also disclosed that investments across the scheme had reached over $200 billion in foreign investment and over N900 billion in domestic investment, with over 100,000 direct employment and total employment impact estimated at over 500,000, when supply chains, logistics networks, and host communities were included.

Oduwole spoke at a stakeholders’ meeting on SEZs in Abuja.

She stated that ongoing regulatory reforms were designed to restore the export orientation of the free-zone scheme while providing greater certainty for legitimate investors.

She also cautioned operators against exploiting fiscal concessions to serve the domestic market while competing with manufacturers operating under the full tax regime.

Oduwole said the government was particularly concerned about the diversion of goods produced in free zones into the Nigerian Customs Territory by operators still enjoying incentives originally designed to promote exports.

She said the reforms were aimed at striking a balance between maintaining the country’s competitiveness as an investment destination and protecting the integrity of the fiscal system.

Oduwole said manufacturers operating within the customs territory had increasingly complained that they were being placed at a competitive disadvantage because they imported inputs, employed Nigerians, and paid applicable duties and taxes, while competing against concessioned goods entering the same domestic market.

She said the situation had also contributed to a proliferation of applications for new free zones.

The minister said government had embarked on a 19-month engagement with lawmakers, government agencies, and private-sector operators to align the SEZ regime with the broader objective of expanding non-oil exports.

Oduwole said the process culminated in a legislative and regulatory reform committee inaugurated in February 2026, involving officials of the ministry, the Nigeria Export Processing Zones Authority (NEPZA). and the Oil and Gas Free Zone Authority (OGFZA).

The reform package included revised NEPZA regulations and operational guidelines, as well as new regulations covering domestic sales, fiscal alignment, and customs treatment for both NEPZA and oil and gas free zones.

A key feature was the clearer application of the 75 per cent export and 25 per cent domestic-sales framework, with domestic sales to be treated in line with applicable Nigerian law.

Oduwole said the reforms would also settle long-standing uncertainties over the respective roles of regulators.

Under the new framework, NEPZA and OGFZA would retain responsibility for licensing and operational oversight, while the Nigeria Revenue Service (NRS) would administer taxes and the Nigeria Customs Service (NCS) will retain responsibility for customs control, valuation, classification, and enforcement.

She stressed that administrative practices could not override primary legislation.

“Administrative circulars cannot amend Acts,” the minister said, adding that historical concessions or practices inconsistent with existing laws could no longer form the basis for investment or regulatory decisions.

The reforms also sought to modernise the zones to accommodate emerging sectors, particularly digital businesses.

Oduwole said the revised NEPZA regulations would formally recognise Digital Free Zones and Digital Special Economic Zones, allowing businesses operating on digital platforms to participate without the conventional requirement of physical presence.

The new regime would also provide for licence categories, such as Innovator Licence, targeted at enterprises operating in emerging areas where regulatory frameworks were still developing.

The minister said the reforms were not intended to undermine investors or eliminate lawful incentives.

Rather, she said the objective was to make the incentive regime “clearer, more coherent and more sustainable” so investors could plan with greater certainty while protecting the integrity of the scheme.

Oduwole also sought to shift the narrative surrounding the zones away from taxation alone, highlighting their contribution to industrial production, employment, and investment.

She cited the recent commencement of production by Health Textiles Nigeria FZE at the Lagos Free Zone, which she said would produce up to 10 million insecticide-treated mosquito nets annually at full scale and employ more than 600 Nigerians.

She also pointed to major investments within the zones, including the Dangote refinery and petrochemical complex and the Lagos Free Zone deep-sea port.

However, she warned that the government would no longer defend operators that abused the regime.

Oduwole specifically listed diversion of goods, mispricing of related-party transactions, and understatement of domestic sales, among practices, that could undermine the credibility of the scheme.

She said, “We can only defend a clean scheme.”

The minister stressed that compliance would be a condition for continued government support for the sector.

She said the ultimate objective was to position the zones as engines of non-oil export growth as Nigeria pursued President Bola Tinubu’s target of building a $1 trillion economy by 2030.

She urged operators and other stakeholders to continue to submit input on the draft regulations, stating that the reform committee remains open to further engagement.

The ministry, she said, would continue to defend the competitiveness of free zones, but would do so alongside stronger enforcement of the rules governing their operation.